Mining major Vedanta’s plans to sell ESL Steel (formerly known as Electrosteel Steel) might garner a lukewarm response from the steel majors in the country, mostly due to its past environmental issues. The divestment plan also hinges on the fact that the firm did not scale up as fast as the group expected.
The firm was earlier evaluated by steel majors, including Tata Steel, JSW Steel, Jindal Steel and Power and ArcelorMittal Nippon Steel India, and several other investors. However, it is unlikely that these steel majors would come with potential bids due to ESL Steel’s earlier environmental issues and rising losses, an industry expert, who declined to be identified, said.
The firm was allegedly accused of violating Forest (Conservation Act) in 2012, which was related to the clearance given for diversion of forest land in Singhbhum District, Jharkhand.
“Vedanta has been trying to sell its entire stake in ESL Steel for some time now, as the company intends to concentrate on its core business of mining and industries. The group is exiting the venture because it did not scale up to the level their expectations of being among the top three firms in that industry,” another expert said.
On Friday, Vedanta, in a regulatory filing, said that it had initiated a strategic review of its steel and steel raw materials businesses and may sell a part or all of these businesses. The company intends to begin the review “immediately” and it will evaluate a broad range of options, including a potential strategic sale of some of its steel businesses.
For FY23, ESL Steel’s net loss widened to Rs 558 crore from Rs 95 crore a year ago, while its revenue rose 20.9% to Rs 7,978 crore from Rs 6,596 crore in FY22.
In 2018, industrialist Anil Agarwal-led Vedanta took control of ESL after its promoters hauled the company to bankruptcy, which also marked the former’s foray into the steel business. Vedanta had acquired ESL through Vedanta Star, its fully-owned subsidiary, for `5,320 crore in upfront payment.
ESL Steel was a subsidiary of Electrosteel Castings and delisted following its acquisition by Vedanta.
At present, Vedanta holds a 95.49% stake in ESL, while the remaining is held by public shareholders. It had produced 1,285 kt of steel in FY23.